What are the Two Most Common Types of Medical Billing?

The health care system consists of different kinds of providers, insurance companies, and patients, all playing their part in the medical billing process. For this reason, it is very important to know the different categories of medical billing for health care providers, as this will determine their reimbursement for the services rendered. This blog will analyze the two most common categories of medical billing, professional billing and institutional billing, and their place in the global healthcare revenue cycle management. In addition to that, we will look at how Medical Billing Services will aid in making these processes seamless for effective and accurate revenue cycles.

What is Medical Billing?

Medical billing refers to filing claims with insurance payers to obtain reimbursement for the costs of medical services rendered to patients. Specifically, medical bill collectors aim to ensure they receive payment as quickly as possible, with minimal or no denial of claims and financial adjustments. Consequently, the business has developed into two main billing divisions to cater to healthcare services: professional and institutional. Notably, each type has laws, billing codes, and requirements for the services and parties involved.

Understanding the Types of Medical Billing

Medical billing can be divided into two primary types:

1. Professional Billing
2. Institutional Billing

Let’s delve into these types, how they differ, and what each entails for healthcare providers.

Professional Billing

Professional Medical billing, or physician billing, deals with claims raised by individual healthcare providers such as doctors, nurses, and other specialists. In this context, practitioners in clinical or outpatient practice are concerned with billing for their services. Professional billing focuses on individual service providers instead of billing in institutions, where bills are raised for all deviated hospital services and other facilities.

 How Professional Billing Works

Professional billing uses a special trucking technique to charge patients directly for the services offered by the providers. Such services include i.e., consultation, purchased surgeries, and follow-up care, all charged as professional fees. For instance, when a patient goes to a doctor’s office for treatment, the office raises a claim classified as professional billing. The insurance company is the target of this claim for payments. 

Claims are the requests for payments for the provided services, and healthcare providers, depending on the billing staff, use certain coding systems like current procedural terminology (CPT) codes and Healthcare Common Procedure Coding System (HCPCS) codes in making claims. Such processes of making a claim usually made up of the following steps are:

• New Patient Registration: Gathering details about the patient, such as insurance and medical history.
• Insurance Confirmation: Verifying coverage eligibility and insurance coverage of the patient.
• Coding: Coding involves applying the correct CPT and HCPCS codes for the services rendered.
• Claim Submission: Filing the claim electronically to the patient’s insurance provider.
• Reimbursement and Follow-up: Follow up on the claim status and get paid.

Services Included in Professional Billing

Services for which professional billing is relevant to include but are not limited to:

• Ambulatory patient care visits.
• Imaging studies and laboratory tests.
• Screening services such as annual check-ups.
• In-office or clinic surgical procedures.
• Return appointments, physician videoconference visits, and so on.

Healthcare providers usually bill such services separately based on their professional fees for delivering the service.

Challenges in Professional Billing

There are often specific hurdles to overcome in professional billing. Coding defects, eligibility verification issues, or insufficient documents often bring about claim denials. Medical billing services significantly help lessen these errors by ensuring accuracy, minimizing claim denials, and enhancing reimbursement speed.

Institutional Billing

Institutional billing, commonly called facility billing, involves billing for services rendered by entire healthcare organizations. Such as hospitals, nursing homes, rehab centers, etc. This billing system becomes important when bigger establishments manage patients. Increasing complexity compared to professional billing due to the wider range of services and resources.

How Institutional Billing Works

Institutional billing pertains to claims made for services rendered to patients as an inpatient or outpatient within a hospital. In contrast to professional billing, institutional billing includes the services offered by healthcare professionals. Billing is also concerned with the facilities, including operating theaters, drugs, and even diagnostic tools. Usually, providers use this type of billing for expensive treatments and surgeries or for facilities that provide care over an extensive period.

In institutions, billing uses two basic coding systems: personnel assign International Classification of Diseases (ICD) codes for diagnosis and use Revenue Codes for service charges. The general steps in institutional billing include the following:

• Patient Registration and Admission – Obtain information regarding patient admission, insurance, and treatment requirements.
• Medical Documentation – Ensures that all treatments, procedures, and services are captured in medical records.
• Coding and Charges Assignment – Assigning ICD and Revenue Codes to distinguish the various services offered in the hospital.
• Claim Submission – Filing the Claims with the insurance payors either using the electronic method or the physical paper filing method.
• Follow-up and Payment Posting – Updating the statuses on the claims, uploading any payments, and making inquiries on the balances still due.

Services Included in Institutional Billing

The scope of institutional billing encompasses a variety of offerings, such as the following: 

• Inpatient and outpatient hospital care
• Usage of the emergency department
• Surgical interventions undertaken in a hospital
• Imaging studies and tests (for example, MRI and CT scans)
• Services rendered on a post-acute care and rehabilitative basis

In the case of institutional billing, the costs include not only the remuneration for the healthcare providers’ services. But also the infrastructure of the billing facility. Such as operating theatre, laboratory tests, and inpatient days.

Challenges in Institutional Billing

Institutional billing can be intricate because of the range of services and resources involved, naturally leading to many errors. Improper paperwork coding mistakes frequently compromise claims and, as a result, cause discrepancies in patient details. Therefore, medical billing services are an important part of controlling the institutional billing practice, enabling healthcare facilities to be reimbursed accurately and on time.

Key Differences Between Professional and Institutional Billing

The two types of medical billing—professional and institutional—serve different aspects of healthcare services. Here’s a quick breakdown of their key differences:

By understanding the distinctions between these two types of billing, healthcare providers can optimize their revenue cycle management and streamline claim processing.

The Role of Medical Billing Services in Managing Professional and Institutional Billing

The provision of medical billing support services is crucial for healthcare practitioners due to the complexity of professional and institutional billing. These services manage all inputs from diagnosis to payment, allowing medical facilities to be paid as quickly as possible. Here’s how they assist in each type of billing:

Professional Billing

• Correct Coding: Professional billers understand and use CPT and HCPCS codes, thus limiting the chances of making errors in claims submitted.
• Claim Status Follow-up: They maintain the claim status and resolve any denials and claim-related issues with the third-party payers on the healthcare providers’ behalf.
• Patient education: Billing staff clarify billing statements and patient liabilities, portraying charge and payment processes clearly to patients.

Institutional Billing

• In-depth Documentation: Medical billers ensure that all pertinent services, including but not limited to admission and discharge documentation, are submitted timely.
• Claims Processing: They process the facility and other claims, such as surgeries and inpatient stays, using the ICD and Revenue Codes.
• Revenue Cycle Management: These billing services promote faster payments through regular claims submission and proper debt collection, enhancing the practice’s revenue outcomes.

Medical billing services provide an important relief in terms of non-clinical workload, thus enabling healthcare practitioners to put more effort into improving patients’ care and earning more revenues. Therefore, these services are operationally relevant as they assist providers in earning the highest capacity residency within the limits of patient care standards.

Conclusion

In the healthcare system, it is important to grasp the differences between medical billing types, professional billing, and institutional billing, which is vital in managing the revenue cycle. Professional billing includes services solely by practitioners or professionals, while institutional billing refers to the services and resources that include healthcare facilities.

Having a dependable medical billing company helps in both professional and institutional billing, which reduces mistakes and claim rejections and increases payments. By removing the hard bit of coding, making and getting paid for claims, medical billing services allow those on the frontline to do what they do best: caring for the patients.